Gordon Brown could hardly have been in a better position to present his fifth Budget.

As a share of national income, spending has not gone up at all - in fact, it has gone down

Public finances are - as usual - in a better state than the chancellor predicted. The Conservatives argue that we can afford to reward ourselves by cutting taxes. Gordon Brown obliged by cutting tax by £3.5bn - emphasising how he could both cut taxes and increase public spending.

Yet hospitals have record out-patient waiting lists. Most class sizes have shot up. Police numbers are down. Pensioners got just a 75p-a-week rise last year. Public transport has never been in a worse state.

There is a reason for this. Public spending simply hasn't gone up in the way Gordon Brown - and, ironically, the Conservatives - like to pretend.

Even the Budget's increase in spending on health and education for next year is entirely funded by a shortfall in spending this year.

It true that taxes have risen since 1997 - some of it by accident, some on purpose. However, this has been used to turn the huge Conservative deficit into a surplus.

As a share of national income, spending has not gone up at all - in fact, it has gone down.

Cuts in public services

The decision to stick to (and undershoot) Tory former chancellor Ken Clarke's "eye-wateringly tight" spending plans in Labour's first years meant cuts in the proportion of national wealth going into public services.

We've heard it before of course - from Margaret Thatcher

The share of national wealth going to health, education, pensioners and the police has fallen over this parliament compared to the average under John Major.

Labour's excuse is to argue that this was necessary to sort out the economic mess the party inherited, and spending has now gone up.

In fact, every year until the end of Labour's three-year spending plans, the party is planning to spend a lower proportion of national income than in May 1997.

Labour's second excuse is that this reduction reflects lower spending on unemployment and national debt interest, which also freed more for public services.

In fact once these are excluded spending is still lower this year than in May 1997.

Finally, Labour offers the most beguiling excuse of all: spending can go up, but if the economy grows faster then taxes can also be cut. We've heard it before of course - from Margaret Thatcher.

No free lunches

Sadly, there are no free lunches unless teachers, nurses, police and pensioners get rises limited to inflation.

Because our priorities always come with a price tag, they are guaranteed - and we can rule out stealth taxes

In the private sector, wage growth broadly reflects economic growth. With the bulk of spending in schools and the NHS (and most other public services) being on staff, the truth is spending on these services has to keep pace with economic growth just to stand still.

Unless, of course, wages and pensions are allowed to fall behind. But that means underpaying doctors, nurses, teachers - and that leads to recruitment and retention problems, which is exactly what we have got.

Liberal Democrat proposals are for immediate improvements, not reliant on growth.

We can afford big increases in pensions, cutting class sizes to an average of 25, abolition of tuition fees for students, more and better paid nurses, more doctors, shorter waiting times for patients and more police on the beat.

Funding them means raising the proportion of national wealth going to these key public services.

Since we will keep the share up, in future years growth will allow us to achieve even more.

To guarantee them, we need two modest tax rises. One penny on income tax will fund the education improvements. Better pensions and NHS improvements come from raising top rate tax from 40% to 50% on income over £100,000 and closing some tax loopholes.

Because our priorities always come with a price tag, they are guaranteed - and we can rule out stealth taxes.